Raising the minimum wage causes slowdown in jobs recovery

By Colin McNickle, The Pittsburgh Tribune-Review/MCT--The Keystone Research Center, that reliably liberal (and, thus, reliably misleading) mouthpiece for organized labor and the social justice crowd, is out with its latest entreaty to raise the minimum wage. And as per usual, its “analysis” suffers from the kind of intellectual myopia so indigenous to the “progressive” cause.

The center, whose 17-member board of directors includes 10 unionistas, claims “over a million workers from every part of Pennsylvania would benefit from a minimum wage increase” and “help nearly one in four workers in rural PA counties.”

That, of course, is the “seen,” viewed through the union-colored glasses of those who dismiss the “unseen” — job losses directly caused by raising the wage floor by fiat. A not insignificant percentage of those who supposedly would benefit from this latest exercise in government command economics in pursuit of “social justice” would lose their jobs — 10 percent of the “youth” cohort alone, by one accounting.

“Contrary to popular belief, wage mandates feed the cycle of poverty by blocking low-skilled employees from the job market,” recites the Commonwealth Foundation, finding it necessary to repeat for the gazillionth time the tutorial that should be taught in high school, if not earlier. “Employers respond to wage mandates by hiring fewer workers and those most harmed are those who most need work experience.”

Keystone waves off this immutable law of economics with broad brush strokes. It might as well have said (with the following grammar mistake intentional): “It don't work that way.” But it does work that way.

As Commonwealth scholar Elizabeth Stelle reminded last week, “We've been here before: Between 2007 and 2009, more Pennsylvania black youths lost their jobs as a consequence of minimum wage hikes than because of the Great Recession.” These, of course, are some of the very people who the sight-challenged beneficents claim they want to help the most.

And on a larger scale, the evidence is even worse, as Amity Shlaes documented last week at National Review Online. Upward pressure on wages, from implementation of the first federal minimum wage in 1938, extended the Great Depression, wrote the noted economics author.

Forcing companies to pay wages above the value produced by workers “is, in effect, a tax that must be absorbed as lost income for the firm or passed on in higher prices,” wrote Jake Haulk, president of the Allegheny Institute for Public Policy, in a Thursday white paper. “If prices cannot be raised” — and usually they can't be because the marketplace will not tolerate them — “and the firm's profitability falls, the owner can make any number of adjustments, including cutting hours and trying to get more work out of those employees who remain or reduce non-wage compensation” (i.e., “benefits”).

“And if that isn't enough, the business might have to close its doors,” added Dr. Haulk, a Ph.D. economist.

The Congressional Budget Office says half-a-million workers or more would lose their jobs if the minimum wage were raised to US$10.10 an hour. And just as wage mandates retarded economic recovery 76 years ago, higher wage mandates today would do the same in the painfully slow jobs recovery from the Great Recession.